Freight Rail

[ Barrels of Oil Equivalent Saved: ]

14M

[ Jobs Impact:]

Low

Medium

High

[ Budget Impact:]

Low

Medium

High

[ Conventional Pollutants Reduced: ]

NOx

271,955 tons

PM

11,520

[ Megatons of GHG Reduced: ]

23

Overview

The U.S. freight rail system consists of 139,000 miles of track used to move 40% of the nation’s goods each year.1 It also provides the cleanest, safest, and most energy efficient way to transport freight over land.2 Trucks will always play a vital role in servicing the “last mile” of the transportation chain. But with total freight movement expected to grow 50% by 2040, America must take full advantage of opportunities to promote its most efficient modal options.3 To maximize its market share, rail will have to overcome challenges like the immense capital investment required to build and maintain infrastructure and the disparity between the federal investments channeled toward rail and highways.

Analysis

Moving freight by rail is four times more fuel efficient than using trucks. It also emits roughly 75% less greenhouse gases4 and eliminates large quantities of vehicle pollution like NOx and particulate matter.5 Rail also helps relieve highway congestion, since a single freight train can carry enough cargo to replace 300 trucks.6 Increasing rail’s market share of total freight movement by just 2.5% would eliminate the need for 7 billion miles of truck travel on American highways.7

Rail also shifts less cost to the public. For every million ton-miles traveled by truck, taxpayers pick up the tab for $7,000 worth of infrastructure costs not covered by gas taxes and user fees, and another $7,000 for the cost of congestion—totaling roughly $29 billion each year. Rail, in comparison, carries less than 4% of those costs.8

Railroads are one of the most capital-intensive sectors in the economy. Unlike highways, which are built and maintained primarily by government, railroad companies are responsible for almost all of the costs of their infrastructure, reinvesting 30-40% of their revenues each year to build and maintain tracks, facilities, locomotives, and equipment.9 However, this investment translates directly into economic growth and job creation, as roughly 50 cents of every dollar spent on rail rehabilitation goes to labor.10

Implementation

The federal government should encourage investment in rail infrastructure and level the playing field between rail and trucking in federal planning and policy.

Reform the Existing Railroad Financing Program to Unlock Funds

The federal government already has a zero-cost financing program for rail that is underutilized. If modified slightly and provided with a relatively small amount of funding, the Railroad Rehabilitation and Improvement Financing Program (RRIF) could provide loans and loan guarantees for billions of dollars in rail infrastructure investment. However, administrative complexity and lack of flexibility in lending terms have kept RRIF from meeting its potential, and only $430 million of the $35 billion in available authority is actually being used.11 Congress can make several adjustments to this program to make it more accessible to applicants and expedite the approval process.12 Fully utilizing the RRIF program would lead to the creation of over 100,000 full-time jobs.13

Extend and Expand the Tax Credit for Rail Infrastructure Investment

The rail industry already invests a greater percentage of its revenues back into infrastructure than most other industries. But to maintain their market share and avoid shifting freight traffic to already-congested highways, railroads may need to dig even further into their pockets.14 This can be particularly difficult for “short line” railroads, which tend to be smaller companies that carry goods a relatively short distance. To help fill this investment gap, Congress should maintain the current tax credit for short line rail infrastructure investment, and extend eligibility to newly-formed or expanded short line railroads.15

Incorporate Rail into National Freight Planning

Despite its contributions to the transportation system, rail is rarely given the same level of priority as highways in federal policy.16 Going forward, Congress and the Administration should be sure to account for the needs of America’s freight rail in all applicable transportation authorization legislation, freight studies, and infrastructure funding mechanisms.

United States, Government Accountability Office, "A Comparison of the Costs of Road, Rail, and Waterways Freight Shipments That Are Not Passed on to Consumers," Report, p. 27, January 2011. Accessed April 15, 2013. Available at: http://www.gao.gov/products/GAO-11-134.

The Department of Transportation should direct additional funds each year toward administrative assistance to RRIF applicants and potential applicants to reduce burdens of the program, as well as processing time. Congress should authorize additional flexibility in the payment of the credit risk premium (CRP) associated with RRIF loans. This could include allowing applicants to utilize private bond insurance for some or all of their CRP, or allowing a borrower to pay the CRP over the life of the loan. Congress should also ensure that FRA methods of valuing collateral incentivize infrastructure in addition to equipment. And finally, Congress could appropriate funds to be used for administrative costs and partial subsidy of the CRP, which would lower a major barrier for railroads that want to utilize RRIF loans but so far have not. The Transportation Infrastructure Finance and Innovation Act Program (TIFIA), used mostly for highway projects, provides this type of credit assistance. It is managed by the Federal Highway Administration and receives $122 million in appropriations each year. See United States, Department of Transportation, Federal Highway Administration, “Fact Sheets on Highway Provisions,” Fact Sheet. Accessed April 15, 2013. Available at: http://www.fhwa.dot.gov/safetealu/factsheets/tifia.htm.

Analysis based on data from the American Short Line and Regional Railroad Association, United States House of Representatives Committee on Transportation and Infrastructure, and the Office of Management and Budget. See Timmons, p. 2; See also “Sitting on Our Assets,” p. viii; See also United States, Executive Office of the President, Office of Management and Budget, “OMB Circular No. A-76,”p. C-8, May 29, 2003. Accessed April 16, 2013. Available at: http://www.whitehouse.gov/omb/circulars_default.

As an example, in the 2012 surface transportation authorization, Congress required the Department of Transportation to study and report back on freight routes with the greatest amount of congestion, presumably to help prioritize future investment. Yet Congress specified that the study was to be done only on highway routes, neglecting railroads and waterways other than to allow for a limited amount of consideration of intermodal access. United States, Congress, House of Representatives, “H.R. 4348—MAP-21,” 112th Congress, 2nd Session, Section 1115, Introduced April 16, 2012, Signed Into Law July 6, 2012. Accessed April 16, 2013. Available at: http://hdl.loc.gov/loc.uscongress/legislation.112hr4348.

How to Use the PowerBook

The PowerBook is a menu of á la carte options, not a blueprint that requires every element to hold it together. It is designed to provide federal policymakers and regulators with a selection of policy ideas to help solve specific challenges in how our nation produces, transports, and consumes energy.

SECTORS

The PowerBook is divided into five economic sectors: power, transmission, buildings and efficiency, industry, and transportation. Each sector includes multiple components, which are specific elements of that sector that require some policy change. Components that impact multiple sectors, such as clean energy finance or regulatory reform, are included in a sixth cross-sector section.

COMPONENTS

Each component has three parts: a short overview, an analysis of the challenges and opportunities for energy, employment, and the environment, and an implementation section that outlines specific actions that Congress, the administration, or the independent regulatory agencies can take. The policy recommendations in the implementation section are intended to serve as frameworks for more detailed legislation or regulatory reform proposals.

The components in the PowerBook reflect the input from a broad group of business leaders, policymakers, analysts, and academics. We will update them regularly to add new policy ideas, revise existing proposals, and reflect progress made in Congress or through the regulatory process. We invite readers to provide us suggestions to build upon the proposals in our components or new policies we should consider adding. Please send us your comments via the contact page.

OUR ANALYSIS

The PowerBook provides both pragmatic ideas to move America toward cleaner energy and data showing the potential impacts that these policies could have on our energy systems and economy. By combining several datasets, from economy-wide to industry-specific, we have developed a basic methodology for each component to estimate the effects these policies would have on CO2, conventional pollutants, and domestic energy needs. While future, independent modeling will provide higher accuracy, the current metrics offer a general barometer of impact and a way to compare the effects of various components.